The Great AI Repricing

Investors are trying to recalibrate. Business models will change with AI. Some will thrive. Others will discover that their moat was more decorative than defensive. Analysts have drawn parallels to the early pandemic era, when entire sectors were abruptly revalued, some permanently. The difference this time is that the disruption is self-inflicted, driven by corporate investment rather than a virus. But the speed of repricing feels similar.

American investors are back at their desks today, after along bank holiday weekend. Last week delivered Wall Street's sharpest decline since mid-November. The culprit wasn't a recession scare or a banking crisis. It was doubt. Specifically, doubt about whether the billions being poured into AI will generate profits quickly enough to justify the price tags.

Software companies, brokerages, trucking firms, and even commercial real estate names were swept up in a broad selloff. The Nasdaq has now closed lower for five straight weeks.

Today's early trading reflects that uncertainty. Nvidia, Microsoft, and Alphabet are under pressure again. Meanwhile, Alibaba unveiled an updated AI model, Qwen 3.5, designed to independently handle complex tasks across text, images, and video. Its U.S.-listed shares ticked higher.

Roughly three-quarters of S&P 500 companies have reported quarterly earnings, and nearly 75% have beaten expectations: well above the typical 67% beat rate. By some counts, closer to 80% have matched or exceeded forecasts. Profits are holding up, but expectations were too high, or valuations were.

About a quarter of companies still need to report. This final stretch of earnings season could either steady nerves or reinforce the idea that peak optimism is behind us.

Notably, Micron announced a massive $200 billion investment aimed at easing the AI memory bottleneck: a bet that demand is real and structural.

The week ahead also brings clarity on inflation and growth. Friday's personal consumption expenditures (PCE) report, the Federal Reserve's preferred inflation gauge, will be closely watched. It follows a cooler-than-expected consumer inflation reading last week, which nudged rate-cut expectations higher.

Traders now see roughly even odds of a 25-basis-point rate cut by June, slightly more optimistic than a week ago. Treasury yields have drifted lower in response, and some analysts argue that if inflation continues to soften, both yields and the dollar could fall further.

There's also a political subplot. Kevin Warsh's nomination as the next Fed chair has calmed some concerns about central-bank independence, though a Bank of America survey suggests his leadership could ultimately mean higher yields and a weaker dollar.

On Friday, markets will also be watching the Supreme Court, which could issue a ruling on Donald Trump's trade tariffs. That decision has the potential to reshape parts of the trade landscape, and corporate margins, depending on the outcome.

Away from earnings and inflation, geopolitics has crept back into focus. U.S. and Iranian officials have begun indirect talks in Geneva over their long-running nuclear dispute. Iran's supreme leader has already dismissed U.S. efforts to undermine his government. Oil prices have softened ahead of the discussions, reflecting a delicate balance: Any easing of tensions could eventually bring more supply to market. But failure could push risk premiums higher again.

Investors are also monitoring U.S.-brokered discussions involving Russian and Ukrainian officials. Add in the fragile state of Iran's domestic economy, where payment plans for groceries have become common amid currency weakness, and the stakes become clearer. Energy markets are trying to price in diplomacy without assuming success.

The corporate calendar gathers pace again after Monday’s pause. Three names stand out as trading resumes: Medtronic in healthcare, Palo Alto Networks in cybersecurity and Cadence Design Systems in software.

Today's economic highlights:

Today's agenda includes: the RBA meeting minutes in Australia; in the United Kingdom, the unemployment rate, average earnings including bonuses, and employment change; the balance of trade in Italy; the ZEW Economic Sentiment Index in Germany and the Euro Area; in the United States, the NY Empire State Manufacturing Index, the NAHB Housing Market Index, and speeches by Fed Barr and Daly; in Canada, the year-over-year and month-over-month inflation rates along with the core inflation rate year-over-year. See the full calendar here.

• Dollar index: 97,135
• Gold: $4,928
• Crude Oil (BRENT): $68.21 (WTI) $63.35
• United States 10 years: 4.02%
• BITCOIN: $687,815

In corporate news:

• Fund manager sentiment is highly optimistic in February, with Bank of America reporting the biggest commodity and equity overweight positions in years while flagging an AI bubble as the top tail risk.
• Eli Lilly plans to turn India into a global export hub through contract manufacturing as booming sales of Mounjaro strengthen its position against Novo Nordisk.
• Adani Group will invest $100 billion by 2035 to build renewable-powered AI data centers in India, partnering with Alphabet and Microsoft to expand capacity.
• Danaher is close to a nearly $10 billion deal to acquire pulse oximeter maker Masimo, expanding into patient-monitoring products.
• Baker Hughes and Vallourec signed a memorandum of understanding to develop green hydrogen storage solutions combining compression and underground systems.
• Moody's has established a regional headquarters in Riyadh to expand its presence in Saudi Arabia.
• GlobalFoundries and Renesas Electronics expanded their partnership with a multi-billion-dollar manufacturing agreement to boost semiconductor production in the US and other sites.
• Spain has ordered prosecutors to investigate X, Meta, and TikTok over the alleged spread of AI-generated child sexual abuse material.
• Thomas Pritzker stepped down as executive chairman of Hyatt Hotels over his past contacts with Jeffrey Epstein, with CEO Mark Hoplamazian taking over the role.
• Cognizant Technology Solutions expanded its partnership with Wallenius Wilhelmsen to provide enhanced IT infrastructure and application services.
• Amazon launched its visual search tool Amazon Lens in Sweden, allowing users to search and shop using images on Amazon.se.
• Twint, owned by banks including UBS, Raiffeisen, and PostFinance, surpassed 6 million users and 901 million transactions in 2025.
• Carrier Air Conditioning & Refrigeration signed a lease with Sri City to build a 10 billion rupee manufacturing facility in India expected to create 3,000 jobs.
• Global private equity firms including KKR and Blackstone are exploring investments in Indian Premier League cricket teams as league valuations and revenues surge.
• Yandex reported a 28% rise in fourth-quarter revenue and recommended a dividend of 110 roubles per share while forecasting further growth in 2026.
• Goldman Sachs plans to remove diversity factors from its board-candidate criteria under pressure.
• Starboard Value plans to push for a significant overhaul of Tripadvisor's board after acquiring a 9% stake.
• Elliott builds a substantial stake in Norwegian Cruise Line Holdings Ltd. to push for governance changes.

Analyst Recommendations:

• Accenture Plc: Wells Fargo upgrades to overweight from market weight with a target price of USD 275.
• Alnylam Pharmaceuticals, Inc.: Freedom Broker upgrades to buy from hold and reduces the target price from USD 470 to USD 410.
• Bath & Body Works, Inc.: Citi downgrades to neutral from buy and raises the target price from USD 21 to USD 25.
• Conocophillips: Roth Capital Partners downgrades to neutral from buy with a target price of USD 112.
• Dollar Tree, Inc.: Rothschild & Co Redburn upgrades to buy from neutral with a price target raised from USD 75 to USD 165.
• Jack Henry & Associates, Inc.: Wells Fargo upgrades to overweight from equalweight and raises the target price from USD 181 to USD 196.
• Marsh & Mclennan Companies: Raymond James upgrades to strong buy from outperform and reduces the target price from USD 240 to USD 225.
• Southwest Airlines Co.: UBS upgrades to buy from neutral and raises the target price from USD 51 to USD 73.
• Truist Financial Corporation: Morgan Stanley upgrades to overweight from market weight with a price target raised from USD 56 to USD 69.
• Upstart Holdings, Inc.: Compass Point Research & Trading upgrades to neutral from sell with a price target raised from USD 20 to USD 30.
• Veeva Systems Inc.: Morgan Stanley upgrades to market weight from underweight and reduces the target price from USD 222 to USD 205.
• Warner Bros. Discovery, Inc.: Rothschild & Co Redburn downgrades to neutral from buy and raises the target price from USD 28 to USD 31.
• Applied Materials, Inc.: DZ Bank AG Research maintains its hold recommendation and raises the target price from USD 205 to USD 340.
• Coinbase Global, Inc.: Mizuho Securities maintains its neutral recommendation and reduces the target price from USD 280 to USD 170.
• Draftkings Inc.: JP Morgan maintains its overweight recommendation and reduces the target price from USD 41 to USD 32.
• Iqvia Holdings Inc.: TD Cowen maintains its hold recommendation and reduces the target price from USD 245 to USD 174.
• Lumentum Holdings Inc.: Mizuho Securities maintains its outperform recommendation and raises the target price from USD 525 to USD 645.
• Moderna, Inc.: Bernstein maintains its market perform recommendation and raises the target price from USD 35 to USD 45.
• Robinhood Markets, Inc.: Mizuho Securities maintains its outperform rating and reduces the target price from USD 172 to USD 135.
• Salesforce, Inc.: UBS maintains its neutral recommendation and reduces the target price from USD 260 to USD 200.
• Walmart Inc.: Rothschild & Co Redburn maintains its buy recommendation and raises the target price from USD 110 to USD 150.
• Workday Inc.: BMO Capital Markets maintains its outperform recommendation and reduces the target price from USD 285 to USD 204.
• Yeti Holdings, Inc.: Piper Sandler & Co maintains its overweight recommendation and raises the target price from USD 43 to USD 54.